Saturday, July 17, 2010

Zenotech Labs - Bitter Pill

I had earlier posted on Zenotech Labs laying down the original premise of the trade in a post here.
After much delay the supreme court judgement came and the court ruled in the favour of Daichhi and the minority shareholders lost the case. The open offer will now happen at Rs 113.6. The stock promptly corrected to the Rs 100 mark where I exited my position taking a loss of about 10-12% on the trade.
A bitter pill to swallow but the downside was factored in the trade in case the judgement came in favour Daiichi.
The stock has subsequently moved down to the Rs 94 level and at some point of time will start becoming attractive considering the high acceptance ratio on the open offer.

10 comments:

Anonymous said...

Not a bad trade at all given the risk reward at that time.Have you considered the fundamental valuation of the stock as well? Does it make sense to buy the stock at Rs 94.

Anonymous said...

How do you go about finding/analysing acceptance ratio information ?

Vivek said...

Ninad,

I know this may sound like a newbie question to you, but how do you calculate the acceptance ratio on such offers? Would appreciate if you could link to an earlier post or an Internet write-up explaining the same.

Thanks,
Vivek

Ninad Kunder said...

Hi Anon1

I m just waiting to see the timelines on the open offer and then take a call on the price at whichbuying the stock will make sense.

Cheers

Ninad

Ninad Kunder said...

Hi Anon2 / Vivek

Acceptance ratio can be computed by looking at the % of residual shareholding other than the person making the open offer. So the acceptance ratio will be 20%/ on the residual shareholding.

There is element of subjectivity in the prcoess in terms of ascertaining what % of the residual shareholder will tender to the offer.

Regards

Ninad

Vivek said...

Thanks for the explanation Ninad. It makes sense now. For Zenotech, the acceptance ratio works out to ~38% assuming all shareholders tender their shares. Based on your experience in these sort of investments, do you think its a healthy enough ratio to see the open offer through?

(I do understand there are other risks involved like time risk. As far as further litigation risk goes, I believe the promoters aren't interested in pursuing the case in courts any further).

Vivek

Reni George said...

Dear Ninad

I had done a trade in zenotech during the period of feb-march and made a profit of around 7 %, i would have had hold onto the postion, but whereby i was not convinced from inside of getting a rate of 160 and i exited.

But as you said now, iam planning to reenter the stock for the open offer,according to you what would be the right price

Anonymous said...

Dear Ninad,

I am also finding the opportunity itneresting. But not sure of it.

have come across a link:

http://umcapitalindia.blogspot.com/2010/07/zenotech-labs-cmp-rs-92-looks.html

Regards,

Anonymous said...

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VIKRAM AG said...

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Regards
Vikram

www.bewareinvestor.blogspot.com